Throughout the period of his employment Pehr (like other University employees) has been a participant in ERIP, a tax-sheltered annuity plan in which University (and now both University and Hospitals) as well as the participants make contributions to a defined benefit program and a defined contribution program. That participation on Pehr's part has been pursuant to collective bargaining agreements that General Service Employees Union Local No. 73, SEIU, AFL-CIO ("Union") had with University and that Union now has with both University and Hospitals. Union has continuously represented the bargaining unit of which Pehr has been a member from the very beginning of his employment.

Under ERIP's terms Pehr's benefits became vested on January 1, 1988.
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On October 31 of that year the entire Physical Plant Medical Group of which Pehr was a member was transferred from the University payroll to Hospitals' payroll, but everything about Pehr's preexisting employment status remained without change after that transfer:

In any event, no analysis need be undertaken of some attempted distinctions raised by Pehr that are patently immaterial (examples of those are the obvious need to switch Pehr from one payroll to another or Hospitals' preparation of new W-2 and W-4 forms for his signature--the latter being required by the Internal Revenue Service simply because University and Hospitals are concededly different legal entities). Instead only the few items that may justify some explanatory comment will be mentioned:

1. Pehr was indeed asked to and did fill out a "Notice of Termination" form. But no substantive effects of his shift from University's payroll to Hospitals' payroll were reflected in the various places provided on that form to show any such changes, and most significantly the form's blank for listing the "Termination Reason Code" was filled in with a number that signified only "transfer."

2. Pehr also filled out Hospitals' "Application for Employment" form. But here too Pehr disclosed his own understanding of the situation by showing the following, in his own handwriting, as his "Reason for Leaving" University:

In sum, the straws at which Pehr grasps would be too weak to sustain any weight even if the relevant test were termination of his "employment" rather than, as the Plan provides, termination of his "service." Pehr's purported distinctions are distinctions without a difference, amounting both individually and in the aggregate to a "so what?"

Not surprisingly, given the purely formalistic nature of University's change to the new two-entity structure (with the resulting transfers on the employment rolls), not one of the well over 1,100 employees who were involved in transfers between the two entities (including 39 who later transferred from University's payroll to Hospitals' between January 1, 1989 and March 1992, and 24 who transferred in the other direction during the same period) received any payment of his or her ERIP contributions on the theory that the transfers were viewed as "terminations." But Pehr, thinking to take advantage of his own nominal change in status by latching onto his accrued pension contributions, has demanded payment and then brought this suit.

To that end Pehr must attempt to rely on one of the following provisions of the 1975 ERIP (it should be noted, as already signaled in this opinion, that each of the provisions refers to the termination of a Participant's "service"):
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10.2 Termination Without Vesting

If, for any reason other than death, the service of a Participant is terminated prior to retirement and before his rights to a Retirement Income based on the University's contributions are vested, he shall receive, in lieu of all other benefits under this Plan, a refund in cash of the aggregate of his contributions, with Credited Interest.

It would be purely and simply a distortion of the real-world facts to treat the purely administrative transfer that took place here as a "termination" under ERIP § 10.3 (or for that matter under ERIP § 10.2, as Pehr would mistakenly have it). Although neither side has come up with any ERISA case law (or for that matter, any other case law) dealing with the question, University has cited an IRS general counsel's memorandum,GCM 39824 (July 6, 1990), reported in CCH Pension Plan Guide P17,524 at 20,985-95, that reaches the same "no" answer that common sense would dictate (cf. also Rev. Rul. 79-336 (1979-2 C.B. 187), updating and restating Rev. Rul. 72-440 (1972-2 C.B. 225), following the same line of analysis in dealing with the similar though not identical concept of separation from service in determining the tax treatment of rollovers and lump sum payments in case of payroll transfers to an affiliated corporation involving no change in job).

But there is something very disquieting about the notion that a court must always accord first priority to the issue of class action certification--at least no such treatment seems called for in situations where as here (1) the plaintiff's own individual claim appeared from the outset to be wholly without merit even in facial terms and (2) the defendant is not urging that it should get the benefit of a favorable determination on the merits against all members of the putative class (that would be the effect of a class-action certification followed by the court's ruling on the substantive claim). If the defendant is not concerned on that score--whether because it believes that it is unlikely to be the target of repetitive claims (probably because of the total lack of merit that it perceives in the claim) or otherwise--it is difficult to see any legitimate complaint about the court's prompt addressing of the merits (or far more likely the lack of merit) of the individual plaintiff's position.
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On the other side of the coin, if the defendant wins on the merits against the original plaintiff without the benefit of a prior class certification, it cannot then urge defensive claim or issue preclusion against any other plaintiff who may sue on the same type of claim later.

In a sense the filing of a class action is something like forming a corporation. Tax and corporate practitioners know that the latter procedure is virtually costless, both because of the ease of corporate formation and because both the formation and the funding of the corporation are tax-free. But getting out of a corporate structure once it is in place can be painfully expensive in terms of the income tax consequences. Hence the knowledgeable practitioner approaches corporate formation gingerly and not as a casual and thoughtless decision.

Just so with the class action. It is all too easy to throw the necessary allegations, including those supporting the Rule 23 preconditions to certification, into a complaint. That too is a seemingly costless step. But once the class environment is created, extricating oneself from the resulting procedural entanglements can be most troublesome--consider, importantly, the mandate of Rule 23(e) that prohibits the dismissal or compromise of a class action without court approval and that requires that all class members must be given notice of the proposed dismissal or compromise in such a manner as the court may direct. Small wonder that Professor Arthur Miller some years ago uttered a kind of think-before-filing caution as to class actions (see his An Overview of Federal Class Actions: Past, Present & Future, 4 Just. Sys. J. 197, 208-09, 215 (1978)) that has since become a general principle embodied in Rule 11--this time on pain of suffering sanctions for not doing so.

There is no genuine issue of material fact, and University and ERIP are entitled to a judgment as a matter of law on Pehr's Count I. Pehr's individual claims are dismissed with prejudice. As for Count II, for the reasons already stated that Count is dismissed without prejudice to any future effort by a putative class member other than Pehr to assert any claim against University or ERIP.

Milton I. Shadur

Senior United States District Judge

Date: July 14, 1992

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